Industry Analysts See Market Rebound from Different Perspectives

Industry Analysts See Market Rebound from Different Perspectives

"Industry analysts from around the world descended on SEMICON West 2010 to share their latest perspectives on the strong rebound in chip sales and capital expenditures. While last year's dismal market environment, driven by global macro-economic factors, reached unprecedented, historic lows, the current market rebound is having a wide range of impacts depending on the industry segment.

Global IC Demand Surging

In January of this year, the IC revenue demand forecast for 2010 from eight prominent market analysts averaged 14.9 percent growth. Today, every analyst has updated their chip industry forecasts to a range from 28.4 to 31 percent, averaging 28.7 percent, one of the strongest anticipated revenue growth years on record. According to the most recent SIA reports, IC unit shipments in May 2010 reached $24.7 billion, an all-time record.

There are a number of market drivers for this heady growth rate. According to the Gartner market research firm, PC unit production is expected to grow 22 percent in 2010, and cell phone unit production is expected to grow 14 percent. More so than in the past, current worldwide chip demand is being fueled by broad-based consumer demand emerging from Asia, especially China and India. According to IDC, Asia/Pacific will grow its share of semiconductor revenues to over 45 percent by 2014.

Capital Spending Tries to Catch Up

According to the mid-year SEMI Capital Equipment Forecast announced during SEMICON West, SEMI projects 2010 semiconductor equipment sales to reach $32.50 billion. The forecast indicates that, following a -46 percent market decline in 2009, the equipment market will expand by 104 percent in 2010 and experience annual growth of about 9 percent in 2011.

Wafer processing equipment, the largest product segment by dollar value, is expected to increase 107 percent in 2010 to $24.46 billion. The forecast predicts that the market for assembly and packaging equipment will grow by 109 percent to $2.95 billion in 2010. The market for semiconductor test equipment is also forecasted to grow by more than 100 percent to reach $3.23 billion this year.

Growth is forecasted for all regions in 2010, with Taiwan being the largest market for equipment spending followed by South Korea. North America will be the third largest market in overall spending on semiconductor equipment. China and the Rest of World regions will experience growth rates over 100 percent.

Forecast by Equipment Segment

Equipment Type

2009

2010 Forecast

% Chng

2011 Forecast

% Chng

Wafer Processing

$11.84

$24.46

107%

$27.29

12%

Test

1.55

3.23

108%

3.44

7%

Assembly and Packaging

1.41

2.95

109%

2.81

-5%

Other*

1.11

1.85

67%

1.99

8%

Total

$15.92

$32.50

104%

$35.53

9%

Forecast by Region

2009

2010 Forecast

% Chng

2011 Forecast

% Chng

North America

$3.39

$4.57

35%

$4.94

8%

Japan

2.23

4.08

83%

4.70

15%

Taiwan

4.35

9.18

111%

9.28

1%

Europe

0.97

1.92

98%

2.10

9%

South Korea

2.60

7.49

188%

8.08

8%

China

0.94

2.24

138%

2.64

18%

Rest of World

1.44

3.01

109%

3.80

26%

Total

$15.92

$32.50

104%

$35.53

9%

* Results reported in market size in billions of U.S. dollars and percentage growth over the prior year. Totals and percentages may differ due to rounding of numbers

Bob Johnson from Gartner told the SEMICON Market Symposium audience that current capital spending is dominated by technology buys and will increase by 83.5 percent this year driven by the move to 4x and 3x nm capabilities. Capacity spending won’t begin “in earnest until 2011.” Johnson sees capex spending for logic/mixed signal exceeding memory spending in 2010, with both segments spending approximately $25 billion each in 2011. Gartner sees spending for capital equipment reaching $35.4 billion in 2010 (113 percent increase over 2009), reaching to $47.7 billion in 2011 and $40.4 billion in 2012.

Dean Freeman at Gartner states the battle between TSMC and IBM Common Platform technologies as among the key stories unfolding over the next two years. Freeman sees the foundry market growing faster than the overall IC market at 2009-2016 CAGR of 16 percent, reaching 35 percent of the total IC market. Currently TSMC dominates the 12-inch capacity with over 150,000 wafer starts per month (WSPM) capacity in Q4 of 2009, nearly three times that of GLOBALFOUNDIRES (GF) and UMC. However, at 45/40 nm, Chartered and GF capacity exceeded TSMC in Q4 of last year. The race is on to add customers and capacity at this advanced node, and Freeman predicts that by Q4 2011, TSMC will exceed GF capacity at the 45/40 nm node, though both companies will have over 100,000 12-inch WSPM capacity at this node.

Despite the quick return of capital spending, Bill McClean of IC Insights sees equipment spending still on the historical low-side as a percentage of overall IC sales. Capital spending as a percentage of sales averaged around 20 percent from 2003-2008; this year it will reach 15 percent after last year’s 11 percent. This will sustain average selling prices and keep capital utilization high in the industry. McClean sees fab capacity utilization exceeding 96 percent this year.

According to E. Jan Vardaman, TechSearch International, there’s also a “massive expansion in Capex at OSATS (outsourced semiconductor assembly and test). Spending plans are at 2.7 times the 2009 levels at ASE, SPIL, STATS ChipPAC, Unisem, and UTAC. The industry is undergoing a massive conversion from gold to copper wire (over 5,000 wire bonders orders reported in 2010) and capacity for both 300 mm bumping and wafer-level packaging is in short supply. Mobile phones are driving wafer-level packaging to nearly 18 billion units shipped in 2012, an 11.5 percent CAGR from 2009 to 2012. Furthering equipment buying is driven by the increasing needs for 3D stacking, silicon interposers and micro bumps for TSV.

In materials, the SEMI Forecast predicts a 17 percent increase in semiconductor materials revenue in 2010 followed by a 6 percent increase in 2011. Japan will be the largest market for semiconductor materials with an expected $8.89 billion in spending this year, followed by Taiwan at $8.17 billion, Southeast Asia at $6.78 billion, and Korea at $5.74 billion. John Housley from Techcet Group sees materials growth areas in ArF resists for 193 nm lithography and interconnect materials (CMP, metals, dielectrics). Housley predicts the photoresist market to rebound from $950 million in 2009 to $1.2 billion this year, and rising to $1.53 billion in 2012.

2010 will be a record year for semiconductor revenues and unit shipments, and this strong rebound is boosting capital spending and driving materials consumption. And as of now, grow is expected to continue into 2011 though at a lower rate compared to this year.